1. Field of the Invention
The subject invention is directed to a system and method of using relational databases to perform instructed tasks, and more particularly, to a system and method of analyzing transactions involving financial instruments related to an investment portfolio in light of one or more investment objectives defined by an investor.
2. Background of the Related Art
Investment managers, and in particular, those who are responsible for managing the portfolios of large institutional investors, buy and sell fixed income securities and equities, based upon the investment objectives set forth by the investors. For example, a particular institutional investor may wish to restrict certain types of assets from its portfolio. In such an instance, the investor may instruct its portfolio manager not to purchase corporate bonds or equities from certain corporations or industry sectors. Alternatively, a particular institutional investor may have the desire to limit a certain percentage of its assets under management to certain types of fixed income securities. For example, an institutional investor may designate that not more than five percent of its assets under management should be invested in mortgage backed securities.
Investment objectives are generally conveyed from an investor to a portfolio manager in the form of a set of investment rules or guidelines. The investment rules are then used by the portfolio manager to develop compliance rules against which investment decisions or portfolios of investments are analyzed.
Compliance rules operate in two distinct ways. First, a compliance rule can effect a particular investment decision, such as the decision to purchase a large quantity of Treasury notes for inclusion in a particular portfolio. This decision could be governed by one or more compliance rules that would influence the decision before the investment is made. Such a rule is commonly referred to as a “front end” compliance rule. Alternatively, a compliance rule could effect the composition of a particular portfolio, such as by requiring a portfolio manger to sell a quantity of a particular type of fixed income security. For example, as a result of a change in interest rates, a compliance rule may be employed to instruct a portfolio manager to reduce the quantity of a certain class of Treasury notes within a particular portfolio. Such a compliance rule would effect the portfolio as a whole, rather than a particular investment decision, and is therefore commonly referred to as a “back end” compliance rule.
Compliance rules, whether related to back-end or front-end compliance, have been used by portfolio managers in computerized portfolio management systems. In the past, compliance rules set forth by institutional investors have been translated into computer readable statements. Such statements are then used to instruct a computer system to monitor investment decisions and the composition of portfolios as a whole, and to inform portfolio mangers whether particular investment decisions or portfolios of investments are in compliance with the investment objectives of particular investors.
In many instances, the computer readable statements used by portfolio management systems are extremely long, in that they contain a great number of characters and/or symbols representing the investment objectives of an investor. For example, a statement might include a long list of company names or types of investments that a particular investor desires to restrict from its portfolio. In such an instance, the computer programmer is faced with the time consuming task of creating such a lengthy statement. In addition, should the investor want to modify the investment objective, such as by adding or deleting certain types of investments that it desires to restrict from its portfolio, the computer programmer would need to edit the actual compliance rule dealing with such an objective. Such a task is time consuming, as well as disruptive to the effective management of the portfolio. It would be beneficial therefore, to provide a system and method for generating and utilizing compliance rules in a more efficient and cost effective manner.